The US Securities and Exchange Commission (SEC) has charged four former Nortel executives with fraud dating back to 2000.
Frank Dunn, Nortel's ex-CFO and CEO, Douglas Beatty, ex-controller and CFO, Michael Gollogy, ex-controller, and MaryAnne Pahaphil, ex-assistant controller, have had the book thrown at them by the SEC for manipulating secret cash reserves and recognising revenues earlier than they should have to appease Wall Street analysts.
"The defendants charged today all disregarded accounting principles and disclosure requirements designed to provide investors with a clear and accurate picture of a company's performance," says associate director of the SEC's division of enforcement, Christopher Conte. "Investors were misled for extended periods of time about the health and stability of Nortel's operations. Further, these defendants all received significant compensation, in some cases in the millions of dollars, while they were manipulating Nortel's financial results. In some cases, these individuals received such compensation only because they manipulated Nortel's financial results."
Dunn, Beatty, Gollogly and Pahapill are charged with violating and/or aiding and abetting violations of the antifraud, reporting, books and records, internal controls and lying to auditors provisions of the federal securities laws. Dunn and Beatty are separately charged with violations of the officer certification provisions instituted by the Sarbanes-Oxley Act.
The SEC is seeking a permanent injunction, civil monetary penalties, officer and director bars, and disgorgement with prejudgment interest against all four defendants.
Nortel fired Dunn, Beatty and Gollogly in 2004. MaryAnne Pahapill left the company in 2005.